Living Without Credit Cards – Can You Do It?

Credit cards are so ubiquitous that it’s easy to forget that they are a relatively recent invention. Although the concept of credit is hundreds of years old, the credit card as we know it did not become available until well into the 20th century. The first credit card was believed to be the Charg-It card, which was a local use card introduced in 1946. That paved the way for the Diners Club card in the 1950s, and an explosion of credit cards after that. So now, with credit cards everywhere, why would anyone be living without credit cards?

Many people swear off of credit cards because of the fees. Even so-called rewards cards are often packed with fees and interest rates that erode the benefit of having the card. You can read more about rewards cards and the best options available in the article “Are Rewards Credit Cards Worth It? How to Tell If You’re Getting a Good Deal.” Others stop using credit cards after a struggle with identity theft.

Additionally, credit cards can be difficult to manage even for those of us who have a firm handle on our finances. Once credit card debt reaches the tipping point, bad choices such as paying off one credit card with another might seem like the only option. This is one of the worst things that you can do; read more about the negative impact of paying off credit cards with credit cards here. So, once you’ve started using them, can you live without credit cards?

Tips for Living Without Credit Cards

It is more than possible to live without using credit cards, although to avoid impacting your credit history, it’s best to have a credit card or two just to keep your credit score healthy. Keeping these cards in reserve also gives you funds to draw on in an emergency, which in my view is the best reason for having one in the first place. Here are a few tips for living without a credit card.

Make a plan. If you’re looking to get out from under credit card debt and start living without credit cards, be sure to make a financial plan for doing so. Once you are free of credit card debt, you’ll be amazed at how much easier it is to manage all kinds of debt that previously appeared unavoidable. Without the costs of credit card interest and fees, you can even plan to buy a car with cash – learn how in Stumble Forward’s article, “No Credit – 6 Simple Tips to Buying a Car With Cash.”

Use debit or gift cards instead. Unfortunately, since so many people use credit cards, there are many things that you simply can’t do without a card branded by a credit agency – Visa, MasterCard, American Express, and Discover being the big four. Ordering online, setting up recurring payments, and even getting a cell phone can be difficult to impossible without a credit card. However, in most cases, a debit card branded by one of the big four credit agencies works just the same way.

Keep a debit card in reserve. What I have found works best is to have two debit cards; one is my regular debit card, and the other is my “risky activities” debit card. These two cards are in no way attached to each other. I keep a limited amount of money in my “risky activities” account, and use that only for online ordering or setting up services that insist on a credit card. It’s worked well for me, and I haven’t had to use an actual credit card in months!

Keep tabs on your credit. To make sure your credit score doesn’t suffer while you’re living without a credit card, it’s a good idea to take on small revolving debt accounts directly with merchants or other types of debt that you can handle. The simple act of being approved and paying the funds back, even if ahead of time, can keep your credit healthy. Be sure to monitor your credit at least quarterly no matter what you do, to make sure your lack of activity doesn’t make you a target for identity thieves. If you’ve been a victim of identity theft in the past, credit monitoring becomes more worthwhile than ever.

It is possible to go on living without credit cards. It begins with financial discipline, and ends with financial freedom. As we move into 2013, take a look at your credit card statements and calculate how much interest and fees you paid to the credit card companies this year. Then consider what you could have purchased with that money instead. Will 2013 be the year that you start living without credit cards?